There are many things that contribute to income and wealth inequality, but what is the root cause of this problem?

Most people have no clue how money comes into existence. When private individuals create money out of nothing it’s called counterfeiting when un-elected private bankers commit this fraud it’s called Fractional Reserve Lending.

So, what is Fractional Reserve Lending? It is a system in which bankers only need a fraction of reserves in order to issue many times the reserve amount in loans.

Bankers create our money supply by using $1 of reserves to create $9 of new money/loans. An individual by contrast, must first save $1 to lend $1. Those who benefit most are wealthy individuals, trusts and hedge funds who can borrow large sums of money at low interest rates to buy income producing assets such as stocks, bonds, and rental property while the rest of us borrow at high interest rates. In other words, money is created at the top of the wealth pyramid to benefit the top of the pyramid. This is avalanche-up economics; not trickle-down. The only output of this rigged system is structural income and wealth inequality.

No one should be able to create money for their own personal profit. But that’s exactly how Fractional Reserve Lending works. It starts at the Federal Reserve, which is not federal and has no reserves. It is a quasi-public institution owned by a private banking monopoly. Under Fractional Reserve Lending all money comes into existence as loans created out of nothing, just bookkeeping entries.

Thomas Edison said, “"If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good, makes the bill good also....Both are promises to pay, but one promise fattens the usurers and the other helps the people." (1) Why pay interest on money the government can create without interest? It makes no sense.

Debt isn’t real money because if all debts were paid back, then there wouldn’t be any money in the supply. Indeed, paying off the federal debt all at once would tank the economy.

Private bankers create the principle, but not the interest to pay back the loan. The money to pay back the interest has to come from someone else’s loan and eventually someone defaults. It‘s a 300-year-old Ponzi scheme where eventually all the compound interest goes to the oligarchs.

In the bible, Proverbs 22:7, “The rich ruleth over the poor, and the borrower is servant to the lender.” When our government borrows it loses its democratic sovereignty to the lending royalists. There’s a word for that, “plutocracy.” The fractional reserve system allows the banks to concentrate the wealth of the nation to leverage control over our governing policies. By giving banks the money-power to create our money supply as debt, we sanctioned bankers as the ruling class, able to direct our public policies and the fate of our nation’s future. To call this a rigged economy is a colossal understatement.

By controlling the money-power, banks can expand and contract the money supply, causing booms and busts at will. The tremendous power of the ruling elite to tank the economy in order to hold on to the money power means it will take tremendous national courage to change this fraudulent system.

Perpetual and unsustainable economic growth is a requirement of fractional reserve lending in order to pay the interest on the principal. As economist Kenneth Boulding said, “Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.” (2)

The fractional reserve system of monetary expansion is inherently inflationary. The act of expanding the money supply without their being a proportional expansion of goods and services in the economy will always debase the currency. Parity can only be achieved by strict control of the quantity of money. Issuing too much money will cause inflation. Issuing too little money will cause deflation. If we want to retain the value of our money we’ll need a monetary authority that keeps our money at a nominal value.

Fractional Reserve Banking is bad public policy because it legalized what was originally a criminal fraud, legitimized structural wealth inequality and created an un-elected ruling class. In a democracy, bankers should be our servants, not our masters.

Ultimately, who controls the money power is supreme. If you want to “Occupy Wall Street,” then you have to occupy the money power. In a democracy the sovereign government, meaning the people, has the power to issue money interest-free at the bottom of the wealth pyramid for the benefit of all. So, what are we waiting for?

Addressing Income and Wealth Inequality

National Monetary Reform

We need to support and reintroduce the National Emergency Employment Defense Act of 2011, NEED Act, H.R. 2990 introduce by Dennis Kucinich. (3)

(1)The Federal Reserve is dismantled and good parts are placed into the US Treasury. A Monetary Authority is created which avoids an inflationary or deflationary money supply.

(2)Accounting rule changes prohibit the banks from creating what we use for money- from using debt for money - what’s known as fractional reserve banking is decisively ended.

(3)The Congress originates (creates) new US Money and spends it into circulation, for infrastructure, health care and education; starting, for example, with the $2.2 trillion the engineers tell us is needed for infrastructure over the next 5 years. Later the human infrastructure of health care and education is added. This is estimated to create over 7 million good jobs quickly.

Additionally the NEED Act, HR 2990:

· Pays off the national debt as it comes due, if necessary by creating the money to pay for Bonds coming due, rather than rolling them over with new borrowing

· Limits interest rates to 8%, including all fees; Historically, this is a high interest rate

· Ends compound interest; with the rule that total interest may never exceed the principle, except for mortgages

· Lets the 50 states decide where 25% of the new money goes each year through per capita federal grants. Some general areas can be specified – infrastructure, health, education. Unfunded federal mandates, pensions. This is a big deal – no way that any local actions (e.g. mythical local currencies) can be as powerful in solving local crises.

· 2990 Contains a tax free dividend for every citizen. Imagine if the bailout went to all our citizens. Say 3 trillion to the citizens instead of to the banks. With 300 million citizens, that’s $10,000 for every man, woman and child; 40,000 for a family of four. The depression/recession would be over! Banks could have competed for these deposits.(4)

State Reform

We need to support and reintroduce the Minnesota Transportation Act SF65 and HF 610 as introduced – 87th Legislature (2011-2012). (5)

The Minnesota Transportation Act, formally called, “USE OF NEW WEALTH-BASED BOOKKEEPING ENTRY MONEY FOR TRANSPORTATION FUNDING,” can be enacted more simply than requiring an act of Congress and can be implemented as soon as the legislature passes the bill. In less than four months we could create jobs, putting people to work and paying them wages to rebuild the state’s crumbling infrastructure at no cost to the taxpayer.

The concept of the bill is to have state chartered banks issue bookkeeping entries as a way to put money into circulation that will be a direct payment for infrastructure without interest; in lieu of borrowing, bonding or taxation of the people of Minnesota.

Under fractional reserve lending, banks normally create a liability on their books, meaning, debt-money created out of nothing, and then credit the liability as an asset in the borrowers account. In this case, state chartered banks create an asset spent into circulation as a payment for production done, instead of creating and loaning debt into circulation as a mortgage on the production that was just done for the benefit of the banks. Instead of the banks receiving all the benefit, the state, counties and municipalities get the benefit. Since you can’t have commerce without transportation, the whole system works exactly the same as it does now, except with one small accounting change in the genesis of money creation. In other words, we will be monetizing production of infrastructure for the benefit of the people without taxation and without borrowing.